Congress OKs $1.9 trillion boost in debt limit

By Jeanne Sahadi, senior writer


NEW YORK (CNNMoney.com) -- The House on Thursday approved a record $1.9 trillion increase in the cap on how much the government can borrow.

The House also approved a measure that imposes tougher budget rules on lawmakers.

The votes, which broke down largely along party lines, come one week after the Senate approved both measures.

The legislation, which is expected to be signed by President Obama, will raise the debt ceiling to $14.294 trillion.

The debt limit hike is expected to cover the Treasury's borrowing needs past the November mid-term elections and into 2011. That means lawmakers up for re-election won't need to take another politically sensitive vote before the polls open.

If the ceiling were ever breached, the country would effectively be in default. That would slam bonds, the dollar and creditors' portfolios.

As of Wednesday, debt accrued to date was $12.304 trillion, or roughly $90 billion shy of the $12.394 trillion statutory limit currently in place.

Tougher budget rules on tap

Voting to increase an already record-high debt limit was anathema to the fiscal conservatives in the House known as the Blue Dogs. They have been pushing for stricter "pay as you go" budget rules that would curb lawmakers' ability to run the debt up in the future.

To smooth passage Thursday, House leaders used a procedural strategy to allow the Blue Dogs to vote against the debt ceiling hike but for the pay-go legislation.

The pay-go rules would require lawmakers to find ways to pay for proposed spending increases in entitlement programs or for any tax cuts by offsetting them with higher taxes or reduced spending elsewhere in the budget.

Funding for entitlement programs -- such as Medicare and Social Security -- is considered mandatory spending and not subject to annual review by legislators.

"Today will help usher out an era of irresponsibility and begin putting the country back on a fiscally sustainable path," Obama said after the vote.

Pay-go doesn't reduce the debt already accrued, but it would put the brake on future increases -- a helpful first step, budget experts say.

The effectiveness of pay-go, however, depends on its parameters. The strongest form would not allow any policy to be exempt.

However, the pay-go measure that the House and Senate have now passed exempts some expensive measures, such as the cost of a permanent extension of middle class tax cuts. It would also exempt the Medicare "doctor fix" for 5 years and the extensions of relief from the Alternative Minimum Tax and the estate tax for two years.

Supporters of pay-go often credit the policy with helping the Clinton administration create an annual budget surplus after combating the country's annual deficits in the 1990s. But the pay-go law in place at the time did not exempt any expensive policies, said budget expert Charles Konigsberg, author of the book "America's Priorities."

-- CNN congressional producer Deirdre Walsh contributed to this report. To top of page

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Index Last Change % Change
Dow 17,827.75 12.81 0.07%
Nasdaq 4,787.32 29.07 0.61%
S&P 500 2,072.83 5.80 0.28%
Treasuries 2.23 -0.03 -1.15%
Data as of 5:14pm ET
Company Price Change % Change
Kinder Morgan Inc 42.32 0.00 0.00%
Apple Inc 119.00 0.00 0.00%
Facebook Inc 77.62 1.99 2.63%
Pfizer Inc 31.10 0.00 0.00%
Bank of America Corp... 17.11 0.00 0.00%
Data as of Nov 26

Sections

The European Parliament has voted to break up Google and weaken its dominance across the region. More

Warren called it "hypocritical" for the White House to oppose corporate inversions but nominate a person who has worked in this area. More

Two pilots encountered drones while flying over college football games and another pilot saw one while flying over the Hollywood sign. More

Natalie's Cakes and More has raised $84,000 through GoFundMe after protests trash store. More

Retailers are promising big deals this Black Friday, but are the savings actually worth the shopping mayhem? Test your deal-sniffing skills. More

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.